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20 August 2018

Three-quarters of financial services executives in the Asia Pacific are concerned about upcoming regulations and what they mean for data quality and management, according to an annual survey of senior-level risk and regulatory executives conducted by RegTech firm AxiomSL.

Anxiety over financial firms’ ability to comply with incoming regulations is on the rise among APAC executives, 76% of whom said they are more concerned about new regulations than they were last year, up from 69% in 2017.

Alex Tsigutkin, CEO and founder of AxiomSL, said adapting to new regulations is “still a critical challenge” across the region.

“This makes perfect sense — significant initiatives from the Australian Prudential Regulation Authority (APRA) and Monetary Authority of Singapore (MAS) are now underway, which will heavily impact APAC financial firms over the next few years,” Tsigutkin explained.

Data accuracy a concern

Regulators have been demanding “more granular and analytical information”, according to Tsigutkin, and executives have encountered roadblocks in meeting these higher standards of reporting, affecting the trust they have in their data.

Compared to last year, survey respondents are 11% less likely to trust the accuracy of their firms’ data, largely because they lack the necessary technology.

Abraham Teo, AxiomSL’s global head of tax products & head of product management for APAC, told Asian Private Banker that financial institutions have predominantly gathered data to support daily operations rather than for the purpose of regulatory reporting.

Further, the survey revealed that “improving data aggregation, lineage and reporting” will be one of the biggest regulatory challenges firms will face over the next three years, with 63% of APAC executives acknowledging the need to improve capabilities in this area.

“This is where veracity – trust in the accuracy of the data – becomes a crucial issue. Executives are very aware that the data they are capturing isn’t necessarily correct,” Tsigutkin explained.

Teo added that “data ownership, overlapping functions among different business areas like risk, finance, operations, treasury and so on will also affect the perception of the accuracy of data”.

Data management for the future

According to Teo, there will “never be a fully consolidated method to gather, analyse, and secure data”. Instead, banks need to choose the “appropriate pathway” to suit their data needs.

“We have found increased demand for our data lineage product over the past months, which indicates that banks are starting to look at data lineage and traceability as one of the most important improvements,” Teo said.

In June, AxiomSL launched a MAS Open Taxonomy initiative with nine banks in Singapore, PwC, and Business Reporting – Advisory Group (BR-AG) in an effort to organise the industry and analyse regulatory returns.

To improve data security, Teo believes moving data onto the cloud would allow banks to rely on “best in class security measures”. Teo offered AxiomSL’s Material Non-public Information (MNPI) vault as an example — a solution which features built-in encryption and access control to “meet the exacting standards of security set forth by financial regulators”.

“Regulators around the world are embracing this, with MAS announcing that they are not opposed to banks moving to the cloud, and recently, Korea’s FSC and FSS sent out a press release promoting the use of the cloud,” Teo concluded.